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Strength in Equities Drives Yields Higher

Yields moved 3-7 bps higher this week as fixed income markets traded in line with equity markets.  Rates spiked as the S&P 500 pushed towards a new closing high on Friday on the back of positive corporate earnings announcements and headway in U.S.-China trade talks. 

News was less positive from the ongoing Brexit debacle.  At this point, it is likely that another extension will be granted as European policymakers don't want to push the UK into a no-deal Brexit, an outcome which would have serious negative consequences for both the UK and EU economies. 

U.S. economic data was mixed this week, as a weak durable goods orders report for September was offset by an improvement in the Markit US Manufacturing PMI index, which is a sentiment measure for purchasing managers in the industry.  A 25 bps rate cut is still the most likely outcome from next week's FOMC meeting, with most market participants forecasting a pause in Fed policy following that.

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